CFOs and senior finance leaders discuss the importance of purpose in driving business and fostering positive relationships with shareholders.
All organisations need to understand and live their purpose – especially now that business is expected to do much more than simply keep shareholders happy.
CFOs are increasingly vital to these changes, using data to increase transparency, deliver insight on performance, and enable their companies to take a more ethical approach. With the help of senior finance leaders from across business, Finance Director Europe explores how the CFO can take the lead.
Traditionally, many CFOs might have answered questions about corporate purpose with a simple response: to control costs, increase revenue, manage risks and deliver value to shareholders, owners and investors.
However, it’s fair to say that the past decade has seen the emergence of a number of trends that now demand input from the finance function.
These questions include: what is long-term value? Who are we ultimately accountable to? What does the company exist for? And how are we developing our people so that they become well-rounded and fulfilled professionals able to make a genuine contribution to the company and beyond?
A defining question
It’s a question that Andy Halford, CFO of Standard Chartered, feels must involve the CFO.
“There’s no doubt we’ve moved on from the days when a corporation could just look at itself as a self-contained entity with just a few shareholders and say: ‘Let’s make some money and that is it.’”
Nowadays, however, society, customers and employees demand a great deal more from businesses. They are expecting a contribution to local communities through worthwhile employment and sustainable environmental practices such as paying the right level of tax and rooting out bribery and corruption.
In short, it’s clear that businesses that don’t adapt will soon suffer.
Halford believes the CFO is crucial in defining not only how the business plays its role in wider society – but also in how it views itself alongside the growing and improving competition.
“The whole issue of purpose is wrapped up in the question of what will help my business stand out from the crowd? What do we want to do that will resonate with our employees and will make them proud to work for us? How can we help our communities? The word ‘purpose’ is real – it’s not just something you put on the shelf and pick back up occasionally.”
These questions are at the heart of what Standard Chartered does in its environmental, social and governance (ESG) reporting.
And it is leading to clear action: the bank recently launched its first sustainability bond, aiming to tackle some of the world’s biggest challenges in underfunded regions, and bringing cheap and reliable financing to where it matters most, it seems clear that the bank is serious about its obligations.
Indeed, the majority of the €500m bond proceeds will finance the UN’s Sustainable Development Goals (SDGs) in emerging markets, including providing good jobs and growth, helping develop industry and infrastructure, and supporting affordable and clean energy.
“The whole question of purpose is wrapped up in that: what is it that’s going to make my business stand out from the crowd? What is it that we want to do that will resonate with our employees and will make them proud of working for us?”– Andy Halford, CFO, Standard Chartered
A broader perspective
Integrating a company’s purpose into how it plans to grow, where it wants to operate, and how it sees its place in the larger ecosystem are questions that few organisations might naturally direct towards finance.
But the explosion of new sources of data – and the ability to analyse how they affect both the bottom line and broader questions of sustainability – means that this is beginning to change.
“We are seeing companies making strides in areas like emissions and supply chain and clean energy,” says Vivek Saxena, F&A service line leader at Genpact.
“And it requires a clear framework in terms of disclosure and reporting. Because ESG is still quite a nebulous area with lots of different definitions, that framework still needs work and refinement.”
“Finance has a background in analysis,” continues Saxena, “so that means ownership of ESG analysis can be given to finance teams: they have reporting skills and experience working with regulators, so it’s a natural fit.”
CFO of Kone, a manufacturer and service provider of elevators, escalators and flow solutions, Ilkka Hara agrees that the CFO must lead on the question of purpose and that the uniqueness of the role makes that contribution even more vital.
“I think from a CFO perspective, you can bring into the game quite an interesting perspective: how do you make the mission live? How is our vision creating the best people for experience for people? And then also what is our actual performance on delivering that to our customers? So, it creates a loop.
“But I think where CFOs can actually make a big contribution in this area is not only internally, but beyond that. We need to be working with the customer, but also more importantly we should be interacting with all of the investors and other stakeholders to find out what they expect of us.”
Painting the picture
Driving that external communication effectively requires an in-depth understanding of what makes the company tick, what risks it faces, and how it plans to mitigate them.
“I talk to investors all the time, and they want to know what we’re doing to drive ESG initiatives,” says Ed Fitzpatrick, CFO of Genpact.
“They want to know if we’re plugged into our communities around the globe and whether we’re making an impact on the environment – how are we governed?”
So the more that gets automated and put through into dashboards and measured, the more you can improve. And I think we’ve done a decent job at that, we’re thinking about diversity, inclusion and so on. And as the demands to see action from outside voices grow, we are already in a strong position to provide that insight.”
Fitzpatrick explains that every senior leader at the company has a role to play in delivering on Genpact’s purpose: “For example, while I’m the CFO, the infrastructure team also ultimately reports into me, which includes our transport facilities around the world. We are extremely focused on understanding and reducing our carbon footprint, for instance.”
All this is important: “We don’t just act on ESG because it’s the right thing to do, it also adds value.” Hara agrees that for many CFOs, the dialogue with investors, staff and other stakeholders has changed enormously in recent years.
“A few years ago, you tended to have discussions around ESG with experts from time to time,” he says. “Now you rarely have a meeting where you wouldn’t talk about ESG.”
“While we’ve been focused on making progress for many years already now, we have now taken a much more transformational approach on ESG topics. We want to see that as something where we can be a leader – not only in our industry but more broadly.”
The journey that many in finance will go on – from training and qualifying to mastering the basics of running the numbers in a responsive business – is becoming more intense and demanding as technology drives change.
Indeed, Fitzpatrick argues that the changes wrought by digital transformation represent both an opportunity and a challenge for the CFO to embed a sense of purpose across the organisation. And that requires moving beyond mission statements and offering career development options that get the best out of staff.
“As finance leaders in the past we have hired people with finance and accounting degrees and some level of expertise in management information systems,” explains Fitzpatrick, “but they’ve only used a fraction of those skillsets day-to-day because a lot of what they do involves pulling data from multiple disparate systems and consolidating it into a spreadsheet just in time for a meeting the next day.”
Now, with companies making more use of data-led analytics, employees are fully able to use the skills they gained at university and business experience they’ve acquired while working – that they’ve always wanted to apply – which can go a long way to improving recruitment and retention of talented staff.
The more fulfilled they are, the more likely they are to stay on with the business. With finance now expected to use data to deliver more strategic advice, it’s not surprising that more CFOs are focusing on harnessing technology to liberate staff from the ‘handle-turning’ duties.
A look in the mirror
Increasingly, CFOs must ask whether they are up to the task of empowering others to deliver on the business’s stated purpose? And do they know where their own strengths and weaknesses lie?
“I think increasingly we now have to step back and critically assess where improvements are necessary and where to focus our attention,” Fitzpatrick says.
By assessing company core competencies and identifying areas of weakness, CFOs can enhance their understanding of how technology can help the business and free up precious management time to address more strategic, purpose-led issues.
“I think the element of trust has risen in importance,” says Standard Chartered’s Halford. “It’s all very well having good systems but at the end of the day, most systems report on what’s just happened, whereas in fact what you need to be focusing on is what’s about to happen and that tends to be about how the team is doing.”
Many of the issues facing finance teams now tend to be about communication particularly since Covid hit – Halford says he focused the time previously spent elsewhere taking more calls with his people to allow for as much discourse and collaboration as possible.
“Many of those were quick check-ins; they didn’t have to be long calls, just ‘How are things going?’ Helping them to feel able, if they were troubled by something, to pick up the phone or get on the VC and talk about it. Our purpose was to explain that a problem shared was better solved by early interaction and teamwork.”
A new normal
Looking ahead, there’s no doubt that challenges will grow. But smart businesses can harness technology to better understand their place in the world and communicate to their stakeholders what they’re doing to make it a better place.
In doing so, businesses are able to not only ask the bigger, tougher questions, but they can also begin to find the answers.
Fitzpatrick firmly believes that in order to take a leading role in shaping the company’s purpose, the CFO has to get out of the traditional silo and grab the opportunity to demonstrate how finance – through the smart use of technology and careful business-wide implementation – can serve as an engine for change.
“It’s a lot to do with the allocation of my time and the ability to do certain things,” Fitzpatrick comments. “Thanks to automation and smarter tools, more tedious tasks are being left behind. And as things get easier, I’m able to get more focused on the bigger strategic questions that face the business, and to support the business in delivering on its purpose, which is exactly what the CFO of today should be doing.”